Question

Discuss the claim that in a global accounting environment we are now in an era where ‘one size fits all’ for financial reporting.

Answer 1

This ine refers to convergence of the whole world adopting IFRS instead of thier individual financial laws of preparation of accounts

As more companies engage in foreign operations and more investing operations take place in global markets, financial standards could gradually align in response to market demands.

Here are some major advantages of Convergence:

1)The IFRS will place each business entity in the whole world in a level playing field where the preparation and presentation of financial statements will be same ,this will help in comparing one with its foreign competitors

2)Also think of a influencing factor , when we are so competitive and are constantly keeping an eye on our competitors ,the competitor may apply IFRS expand business overseas bring in capital investment be more effective and transparent thereby influencing you to do the same.thus , there is likelihood of IFRS adoption for a given country increasing with the number of IFRS adopters in its geographical region.

3)In addition to this , think of a situation where a entity has foreign subsidy , the foreign subsidy prepares financial statements w.r.t the standard applicable to that foreign country but when consolidating it will have to reconverted into home country's standards for final presentation.This is a lot of work but with introduction Of IFRS this will be eliminated as all financial statements will be prepared in a common language.

4)A common set of accounting standards will cut down time and costs of preparing and reporting financial statements due to different regulations and standards .The use of uniform accounting and reporting standards such as IFRS will allow the business to reduce the costs of financial statements’ preparation.

5)This will provide accurate and timely information to investors, used for making crucial investment decision .With increased transparency, the universal standards allows for easier cross-border investment with low cost of capital and greater liquidity.

6)The adoption of uniform accounting and reporting standards will also eliminate the prevalence of different results on financial statements

7)Interpretation of results will help different stakeholders in making informed decision, Otherwise, using different accounting and reporting standards would present challenges in analyzing and interpreting financial statements.

8)the use of universal language will also enable a holding company to able to monitor its subsidiaries/branches operations more vehemently as you accounts will be easy to understand thereby harmonizing their training, auditing, operation and reporting standards and therefore increasing transparency

9)IFRS is easy to implement and is proactive check on window dressing of finanacial accounts and other synthetic accounting practices ,also giving uniqueness to the business structure and corporate governance thereby representing the true and fair view of financial statements.

10)Most firms in the big four all around the globe are in support of adopting IFRS. This course is affirmed by PWC. KPMG, DELOITTE, E.Y, are all in support of IFRS adoption in the US.

11)Given the above merits of adopting IFRS, it is time for everyone around the world to consider adopting the standards for financial reporting. IFRS will continue to be improved and thus address concerns that has been raised against its capacity.Nonetheless, the merits of adopting a uniform accounting and reporting standard have been found to present more opportunities than costs.